Arbitrage-free SVI volatility surfaces

By Jim Gatheral, Antoine Jacquier. 2012

250 citations recorded by the source corpus.

In this article, we show how to calibrate the widely used SVI parameterization of the implied volatility smile in such a way as to guarantee the absence of static arbitrage. In particular, we exhibit a large class of arbitrage-free SVI volatility surfaces with a simple closed-form representation. We demonstrate the high quality of typical SVI fits with a numerical example using recent SPX options data.

View Paper: https://www.semanticscholar.org/paper/702e02fc46d1feecc5834ffb7e441f864939f4e3

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

1. Claude Martini
2. Aitor Muguruza
3. Antoine Jacquier
4. Shige Peng
5. Marcel Nutz
6. Li-Xin Zhang

Citations in the corpus

• Volatility is rough (2014, unknown): “Atypical such volatility surface generated from a ‘stochastic volatility inspired’ (SVI) (Gatheral and Jacquier 2014) fit to closing SPX option prices as of 20 June 2013‡ is shown in figure 1.”
• Pricing under rough volatility (2015, unknown): “We therefore choose to interpolate and extrapolate observed implied volatilities using the arbitrage-free SVI parameterization of the volatility surface as explained in Gatheral and Jacquier (2014).”
• On VIX futures in the rough Bergomi model (2017, methodology): “Gatheral and Jacquier (2014) originally proposed such a parameterization (called SSVI), and studied absence of arbitrage and calibration to S&P options data.”